This new math is killing me!

When it comes to the state of Georgia’s budget, that’s what a lot of financial gurus are saying actually has happened during the first 2 months of this fiscal year.

In July of this year, revenues were up 4.7% from a year ago and in August they were up 12.7% from the same time last year. So that means that revenues are up 8.6% from where they were for the same two months last year, right?

Not necessarily, say the financial gurus.

After all, if we look closely at the numbers much of the gain in revenue this year is due to fewer individual income tax refunds being issued by the state than last year. Many of us will remember that overdue income tax refunds were finally processed and paid out in July and August of ’09 and subtracted from that month’s total tax collections. This year the state was timely in paying out the refunds in May and June. Couple this with the fact that the number and amount of tax refunds are down this year and the number comparisons are understandably inaccurate.

Remembering that the state derives the bulk of its revenue from three sources- income taxes, corporate taxes and sales taxes- we can see that the financial gurus are probably right. For instance, the numbers show that personal income-tax collections were up 24% for the month of August from a year ago and even the Governor’s office admits that 24% more people aren’t working and people aren’t making 24% more money.

Nevertheless, there is reason for celebration and optimism, albeit guarded. After all, August did mark the fourth month in a row for growth in tax collections after 17 straight months of declines.

So, if we are trending in a positive manner and revenues are increasing, why has the Governor ordered all state agencies except for the Department of Education to brace for a 4% cut in this year’s budget and prepare for as much as a 10% cut next year?

One thing to remember is that the current FY ’11 budget has a revenue growth of 5.09% built into it and if the actual growth thus far has only been 1.3% then obviously we need to be prepared for a shortfall. The next few months should give us a clearer picture of this perspective.

Another reason is that Governor Sonny Perdue, who has proven to be a fiscally responsible leader during some of the worse economic times in modern history, is being conservative about what the state spends so that the next governor taking office in January won’t immediately have to order more cuts.

But the overriding factor in the 4% cut ordered in this year’s budget is to cover the shortfall of $140 million in the federal Medicaid assistance funding percentages (FMAP) that congress failed to approve late last month.

Medicaid is the government’s health insurance program for the poor that is primarily funded by federal matching funds drawn down with state dollars. It is the fastest growing entitlement program in government, as national spending has quadrupled between 1990 and 2008 as states have expanded eligibility and benefits.

Unlike other states, Georgia has been fiscally responsible in managing our Medicaid program. For instance, we spend $6,000 per person in poverty on Medicaid as compared to New York that spends $18,000 per person and only 18% of Georgians are on Medicaid as opposed to 26% in New York.

Unfortunately, federal funding allows states that spend more on Medicaid to receive more matching funds, leaving fiscally responsible states like Georgia holding the bag. For instance, while Georgia will receive about $240 million in FMAP from this latest approval, New York will receive $2.4 billion- more of that new math.

The 10% budget cut preparation that the Governor has ordered for FY’12 is in anticipation of a $1.8 to $2 billion shortfall that is expected due to slow revenue growth as well as the loss of federal one-time stimulus funds.

So while we’re thankful for the increases in revenue over the past few months- the news is still unclear. One thing is clear- this new math is killing me!

About the author

Tom Knighton is the publisher of The Albany Journal. In November, 2011, he became the first blogger to take over a newspaper anywhere in the world. In August of 2012, he made the difficult decision to take the Journal out of print circulation and become an online news agency, a first for the Albany area.